At the start of Parliament’s winter session, Union Minister for Labour and Employment Bandaru Dattatreya announced that the government was preparing to amend eight labour laws, including new codes on wages and industrial disputes. In the midst of the acrimony and shout-fests, however, only one of them could be passed.
As the Parliament amended the Payment of Bonus Act, 1965, on December 23, revising the ceilings used for bonus calculations, it was described as a push for pro-labour legislation. At least by the government and a trade union wing of the Rashtriya Swayamsewak Sangh. For other unions, though, the amendment was inadequate – it just tinkered with existing provisions, without really improving workers’ share in the profits of companies.
What is the law?
The Payment of Bonus Act, 1965, lays down how profits must be shared between workers and employers from the “allocable surplus” after expenses and depreciation have been accounted for in the gross profits. It says that employers must pay 8.33% of workmen’s annual wages as annual bonus – equivalent to a month’s wages – or a sum fixed by the government. Employers normally prefer to pay the fixed sum.
Last pegged at Rs 3,500, the fixed amount was raised in the amendment last week to Rs 7,000. The amendment also redefined workmen as those earning less than Rs 21,000 per month from the earlier classification of those earning under Rs 10,000 a month.
Virjesh Upadhyay, general secretary of the Bhartiya Mazdoor Sangh, a wing of the Rashtriya Swayamsevak Sangh, welcomed the changes. He said the amendments will benefit 5 crore-7 crore industrial workers and claimed credit for a meeting where his union pushed Finance Minister Arun Jaitley to amend the Act retrospectively from April 2014. This means that employers will have to pay arrears to workers for the bonus paid in 2014-'15 as per the old norms.
The felicitations weren’t unanimous.
BP Pant, an advisor to the Federation of Indian Chambers of Commerce and Industry, said the industry, especially small and medium enterprises, will find it difficult to comply with the retrospective requirement since the balance sheets for 2014-’15 had been settled. A representative of the Confederation of Indian Industry concurred with this view.
Left trade unions, meanwhile, expressed concerns at the inconsistency in the changes proposed in labour laws. “Currently, the Payment of Bonus Act, 1965 applies to every factory which employs at least 20 persons,” said Tapan Sen, Rajya Sabha MP and vice president of the Centre of Indian Trade Unions. “But in the Small Factories draft bill, the government has proposed that factories employing less than 40 workers will be exempt from 14 laws, including Payment of Bonus Act. How will this be implemented?”
On the ground
Trade unions say the amendments may change little on the ground – primarily because it is rare when negotiations between industrial workers and employers are determined by legal norms alone.
Dr Animesh Das, president of the Indian Federation of Trade Unions, said a survey of 293 factories in Delhi’s Okhla and Mayapuri industrial areas revealed only 10% of workers got a regular bonus. In Mayapuri, the bonus the workers got depended on how organised they were.
“Of the few factory owners who pay bonus, most pay Diwali bonus of Rs 2,500-Rs 2,000, lower than the legal norm,” said Rajesh Kumar of the Indian Federation of Trade Unions who works in Mayapuri industrial area. “At the same time, though 8.33% is the norm, in factories where workers are organised, or in large companies that earn huge profits, workers negotiate for even 10% to 15% of annual salary as bonus. In Mayapuri, where the industrial units are smaller, we try to do the same especially, if management is not aware of intricacies of law, or don’t have a lawyer or consultant.”
N Vasudevan, national secretary of the New Trade Union Initiative, said the government has only tinkered with the law, revising ceilings. It chose to ignore workers’ long-standing demand to remove the ceilings altogether. “As per the original Act, the bonus could go up to 40% of the ‘allocable surplus’ but the ceilings limit this to much lower amounts,” said Vasudevan.
He pointed out that bonus norms apply only to those workers directly hired by factories and not to contractual workers. This is why the unions have been demanding Rs 15,000 as minimum wage, social security for all workers, and abolition of contractual system.
Increasing inequality
Government data bears out the unions’ contention that workers’ wage as share in profits has stagnated, even fallen, though the value of output and profits has risen.
According to an analysis of the Annual Survey of Industries data by economists CP Chandrasekhar and Jayati Ghosh, profits of firm owners have risen nearly constantly in the last 30 years, from 23% in 1990-’91 to more than 50% in 2010-’11. But wage payments, as a percentage of net value added in organised manufacturing, fell from 25.6% in 1990-’91 to 19.3% in 2000-’01. Nearly a decade later, in 2009-’10, workers’ wages accounted for only 11.9% of net value added, among the lowest ratios anywhere in the world.
Similarly, economist Himanshu shows in an analysis of several years’ Annual Survey of Industries reports that between 1991-’92 and 2011-’12, the biggest increase in wages has been cornered by white-collar workers, with daily managerial emoluments growing at a rate several times faster than workers’ wages.
As the Parliament amended the Payment of Bonus Act, 1965, on December 23, revising the ceilings used for bonus calculations, it was described as a push for pro-labour legislation. At least by the government and a trade union wing of the Rashtriya Swayamsewak Sangh. For other unions, though, the amendment was inadequate – it just tinkered with existing provisions, without really improving workers’ share in the profits of companies.
What is the law?
The Payment of Bonus Act, 1965, lays down how profits must be shared between workers and employers from the “allocable surplus” after expenses and depreciation have been accounted for in the gross profits. It says that employers must pay 8.33% of workmen’s annual wages as annual bonus – equivalent to a month’s wages – or a sum fixed by the government. Employers normally prefer to pay the fixed sum.
Last pegged at Rs 3,500, the fixed amount was raised in the amendment last week to Rs 7,000. The amendment also redefined workmen as those earning less than Rs 21,000 per month from the earlier classification of those earning under Rs 10,000 a month.
Virjesh Upadhyay, general secretary of the Bhartiya Mazdoor Sangh, a wing of the Rashtriya Swayamsevak Sangh, welcomed the changes. He said the amendments will benefit 5 crore-7 crore industrial workers and claimed credit for a meeting where his union pushed Finance Minister Arun Jaitley to amend the Act retrospectively from April 2014. This means that employers will have to pay arrears to workers for the bonus paid in 2014-'15 as per the old norms.
The felicitations weren’t unanimous.
BP Pant, an advisor to the Federation of Indian Chambers of Commerce and Industry, said the industry, especially small and medium enterprises, will find it difficult to comply with the retrospective requirement since the balance sheets for 2014-’15 had been settled. A representative of the Confederation of Indian Industry concurred with this view.
Left trade unions, meanwhile, expressed concerns at the inconsistency in the changes proposed in labour laws. “Currently, the Payment of Bonus Act, 1965 applies to every factory which employs at least 20 persons,” said Tapan Sen, Rajya Sabha MP and vice president of the Centre of Indian Trade Unions. “But in the Small Factories draft bill, the government has proposed that factories employing less than 40 workers will be exempt from 14 laws, including Payment of Bonus Act. How will this be implemented?”
On the ground
Trade unions say the amendments may change little on the ground – primarily because it is rare when negotiations between industrial workers and employers are determined by legal norms alone.
Dr Animesh Das, president of the Indian Federation of Trade Unions, said a survey of 293 factories in Delhi’s Okhla and Mayapuri industrial areas revealed only 10% of workers got a regular bonus. In Mayapuri, the bonus the workers got depended on how organised they were.
“Of the few factory owners who pay bonus, most pay Diwali bonus of Rs 2,500-Rs 2,000, lower than the legal norm,” said Rajesh Kumar of the Indian Federation of Trade Unions who works in Mayapuri industrial area. “At the same time, though 8.33% is the norm, in factories where workers are organised, or in large companies that earn huge profits, workers negotiate for even 10% to 15% of annual salary as bonus. In Mayapuri, where the industrial units are smaller, we try to do the same especially, if management is not aware of intricacies of law, or don’t have a lawyer or consultant.”
N Vasudevan, national secretary of the New Trade Union Initiative, said the government has only tinkered with the law, revising ceilings. It chose to ignore workers’ long-standing demand to remove the ceilings altogether. “As per the original Act, the bonus could go up to 40% of the ‘allocable surplus’ but the ceilings limit this to much lower amounts,” said Vasudevan.
He pointed out that bonus norms apply only to those workers directly hired by factories and not to contractual workers. This is why the unions have been demanding Rs 15,000 as minimum wage, social security for all workers, and abolition of contractual system.
Increasing inequality
Government data bears out the unions’ contention that workers’ wage as share in profits has stagnated, even fallen, though the value of output and profits has risen.
According to an analysis of the Annual Survey of Industries data by economists CP Chandrasekhar and Jayati Ghosh, profits of firm owners have risen nearly constantly in the last 30 years, from 23% in 1990-’91 to more than 50% in 2010-’11. But wage payments, as a percentage of net value added in organised manufacturing, fell from 25.6% in 1990-’91 to 19.3% in 2000-’01. Nearly a decade later, in 2009-’10, workers’ wages accounted for only 11.9% of net value added, among the lowest ratios anywhere in the world.
Similarly, economist Himanshu shows in an analysis of several years’ Annual Survey of Industries reports that between 1991-’92 and 2011-’12, the biggest increase in wages has been cornered by white-collar workers, with daily managerial emoluments growing at a rate several times faster than workers’ wages.
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